Gold Surprises As November Employment All But Clinches Fed Rate Hike

The big, big surprise today was the precious metals complex, which exploded and caused brains to freeze around the world. Two questions arose: “Why” and “For how long?”

Palladium was the biggest mover, soaring to the upside by 6.5%. Platinum was close on its heels, moving 4.00% to the upside. Silver and gold rose 3.40% and 2.25% respectively.

To answer our two questions above, first gold and the whole complex had been squeezed into a short funnel that cried out for short covering moves. Gold had drifted down toward a sixe-year low, for instance. We certainly saw the short coverers move in with a vengeance.

Likewise, we will see the profit takers move in at any moment. Why not ride gold up and up based on fundamental assessments of the market?

The main focus for the gold market now remains the meeting of the U.S. Federal Open Market Committee on December 15 and 16. The expected rate increase would be the first in nearly a decade.

Higher rates usually weigh on non-interest-paying gold by increasing the opportunity cost of holding it.

With the impressive growth in November employment reported out by the U.S. Department of Labor this morning, we’d be hard pressed – after all the laughing, scratching and palavering by the Fed – to cite a reason why the central U.S. bank would not have a rate liftoff.

The great jobs news coupled with more dovish talk from Mario Draghi of the European Central Bank pushed American equities up dramatically. The Dow, S&P 500 and NASDAQ all surged.

Subscribers should be trading the S&P 500 e-mini long right now, according to the trade alert we sent out shortly after 2 PM Eastern Time.

The major news really in the world of finance – the one that circles the players in New York and Chicago, anyway – is that we can find certainty in the Fed’s upcoming rate increase. We can also look forward to a second increase not in January, but in March at the second FOMC meeting.

Whether that increase materializes or not is not material. Now all investors, traders, analysts and institutions know the Fed can and will act.

Very soon, that same pack of howling purveyors of woe will comprehend that a little rate hike is not a sign to run away from investing but to hang close and watch for the more solid companies to outperform the weakling that have been counting on easy money.

Wishing you as always, good trading,